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Roth contribution vs. traditional contribution: which is better?
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TSP
Administered by the Federal Retirement Thrift Investment Board, this defined contribution plan for federal employees has roughly 4,614,874 participants, and over $358 billion in assets under management. Ask your TSP questions and post related topics here.
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Rank: Groupie
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Joined: 1/27/2020(UTC) Posts: 82  Location: Washington DC Thanks: 2 times
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I use roth contribution for employee part, but suddenly I don't know it is worth or not.
Now I think: maybe traditional contribution is better, you pay no tax on traditional contribution NOW,and probably you will need to pay little tax on traditional withdrawal in the future for some reasons: 1) Retiree income is lower, and income falls into lower bracket; 2) Some states are very friendly with retirement income.
Anyone has any comments?
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I would do the Roth... pay the tax now while you're working. Then you don't have to worry about additional tax later. Taxes can only go up from here :( |
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Though I agree that taxes are only able to go up, there is compelling evidence that someone might want to us a traditional retirement account. If you are a point where the reduction in income by using a traditional account would take you below a tax bracket, then your Roth contributions would be taxed at a lower rate. If you State does not tax certain retirement accounts, you could avoid the tax when you earn it, and when you with draw it. Do you plan to move to a no income tax state in retirement? You could avoid that tax when you earn it, and when you take it out. There is the "standard deduction" in the tax code. So some of the traditional account will come out tax free. It is a lot of number crunching. I have decided to use the Roth accounts. The Agency matching goes into a Traditional account, to be taxed at the time of withdraw. I am to far into the next tax bracket to be able to get below that mark. Edited by user Saturday, September 12, 2020 7:47:37 PM(UTC)
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Wife has Traditional TSP account. She is not currently working, but will be going back to work soon. Can she open a New Roth TSP account or will she be required to contribute to her current Traditional TSP account?
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Originally Posted by: icanzz  Wife has Traditional TSP account. She is not currently working, but will be going back to work soon. Can she open a New Roth TSP account or will she be required to contribute to her current Traditional TSP account? Yes, she can open a Roth and can contribute to both at the same time.
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Federal Soup
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Roth contribution vs. traditional contribution: which is better?
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